Auto Loan or Lease Coverage

August 31, 2015

The insured has a personal auto policy (PP 00 01 01 05) endorsed with the auto loan/lease coverage (PP 03 35 09 93).

The insured had a covered auto accident. The insured vehicle was a total loss. The ACV of the vehicle was $10,000. The collision policy deductible is $500. The amount paid under Part D (coverage for damage to your auto) was $9,500 after deductible. Now, at the moment of the auto accident, the amount due to the bank for the loan was $12,500. Assume that the $12,500 due to the bank is all covered under the auto loan lease coverage. In others words the $12,500 does not includes any overdue lease payments, financial penalties, etc.

Does the auto loan/lease coverage endorsement provide coverage for $3,000, the difference between $12,500 and $9,500, or for $2,500, the difference between $12,500 and $10,000 (ACV covered loss)?

If the auto loan/lease coverage endorsement provides coverage for the $3,000 then the collision deductible of $500 will be assumed by the loan/lease coverage and the insured will benefit from this. If the auto loan/lease coverage endorsement provides coverage for $2,500 then the insured will have to pay $500 (collision deductible) to the bank in order to cancel the loan.

Georgia Subscriber

The endorsement states that the insurer will pay any unpaid amount due on the lease or loan less the amount paid under part D of the policy. Since part D paid $9,500, and the loan amount due was $12,500, the endorsement will pay the difference between the $12,500 and the $9,500, or $3,000.